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Comparative Study - Cooperative Banks and the Grameen Bank Model


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									This document was prepared by Vishwas Satgar, Executive Director of the Co-operative and Policy Alternative
Center(COPAC). 2003

Comparative Study- Cooperative Banks and the Grameen
                    Bank Model

This document was prepared by Vishwas Satgar, Executive Director of the Co-operative and Policy Alternative
Center(COPAC). 2003

                                               Executive Summary

This study focuses on the Co-operative Banking model and the Grameen Bank model. It
attempts to highlight their histories, institutional arrangements, the design of their saving and
loan delivery systems and most importantly their strengths and weaknesses. Emerging out of
this are a set of five general policy recommendations. In summary these recommendations

    The establishment of a Savings and Credit Co-operative for Midrand with specific
     institutional arrangements;
    The conceptual design of a savings and loan delivery system that is membership driven
     and underpinned by the achievement of financial sufficiency;
    Assessing the feasibility of using “smart card” technology;
    A public and community partnership to solidify commitment to this initiative; and
    A capacitation team that oversees a well defined capacitation process.

This document was prepared by Vishwas Satgar, Executive Director of the Co-operative and Policy Alternative
Center(COPAC). 2003


                                                          Section - I
1. Introduction

2. Methodology

                                                          Section – II

3. The Co-operative Model
3.1 A Brief History of Co-operative Banks
3.2 Overview of the South African Co-operative Model

4. Essential Features of the Savings and Loan Delivery System
4.1 Membership
4.2 Management and Administrative Structures
4.3 Savings and Investment Policy
4.4 Loans Policy

5. Training

6. Financing and Economic Viability
6.1 Start-up Costs
6.2 Operational Costs

7. Main Weaknesses and Strengths

                                                           Section - III
8. The Grameen Bank
8.1 The Vision
8.2 Overview of the Grameen Bank Model

9. Essential Features of the Savings and Loan Delivery System
9.1 Exclusive focus on the Poorest of the Poor
9.2 Borrowers Organised into Small Homogenous Groups
9.3 Loan Conditions Specially Tailored for the Poor
9.4 Undertaking Social Development Programs to Address Basic Needs of the Poor
9.5 Design and Development of a Credit Conducive Organisation and Management
    System Capable of servicing the Poor
9.6 Expansion of the Loan Portfolio to Meet Diverse Development Needs of the Poor
9.7 Strategic Market Orientated Credit Policies
9.8 The Organisational Structures and Functions

10. Recruitment and Training of Bank Workers
10.1 Incentive Schemes for Bank Workers

11. Financing and Economic Viability
This document was prepared by Vishwas Satgar, Executive Director of the Co-operative and Policy Alternative
Center(COPAC). 2003
11.1     Latest Information on the Cost of Funds
11.2     Bad Debt Provision
11.3     Sources of Funds
11.4     Brief History on Early Sources of Funds
11.5     Assessing Start-Up Costs
11.6     The Replication Fund and Assistance Program

12. Main Weaknesses and Strengths

                                                            Section – IV

13. General Recommendations

Appendix A – The Grameen Banks Sixteen Decisions
Appendix B – The Profit and Loss Account


This document was prepared by Vishwas Satgar, Executive Director of the Co-operative and Policy Alternative
Center(COPAC). 2003

1. Introduction

While there is spectrum of micro-lending and institutional arrangements that span NGOs,
associations and more softer options like loan guarantees, the focus of this study is on micro-
lending institutions that have the potential to provide an alternative to the mainstream
commercial banking system. These institutions are Co-operatives and the Grameen Bank.

Co-operative banking arrangements go back to the previous century and where first attempted
in Germany. Today, in the world, there are about 35 000 co-operative credit unions with an
estimated membership of about 95 million. In South Africa credit unions first emerged in the
early eighties and where part of initiatives spawned by Catholic parishes in the Western Cape.
By the nineties this urban based movement has grown in South Africa and is formalised under
an umbrella organisation of Savings and Credit Co-operatives (SACCOs) known as
SACCOL. SACCOL has 16 paid up and affiliated SACCOs. At the same time, in the nineties
the Department of Agriculture began experimenting with pilot Financial Services Village Co-
operatives (FSVC) in four provinces : Mpumalanga, Northern province; Eastern Cape and
North West. Out of this experience has emerged five village co-operative banks and an
umbrella organisation called the Financial Services Association.

Both the urban based SACCOs and the FSVCs have been targetting the poor and have
attempted to provide credit and savings facilities to them. SACCOs are estimated to have an
asset size of R9 million and FSVCs possibly about R4 million. SACCOs have endearvoured
to provide a high volume of loans using a people centred risk assessment and loan recovery
system. FSVCs have concentrated on providing a safe and efficient saving facilities to the
rural poor, through a basic institutional infrastructure and low operating costs. In this study
the terms “Credit unions”, “financial services co-operatives” and “village banks” all refer to
co-operatives and are used interchangeably at times in this report.

The Grameen Bank1 (GB) of Bangladesh was founded in the early 70's by its present
managing director, Professor Mohammad Yunus. The GB grew out of a successful
experiment which involved issuing micro-loans amounting to $27 to 42 destitute women, who
used these loans to engage in micro enterprises. Presently the GB lends to more than 2.3
million people (95% women) and has a loan recovery rate of over 98%. The GB is unique
among banks , since it is both a bank and a poverty alleviation organisation.

The GB has successfully reversed conventional banking practices by removing collateral
requirements and has developed a banking system based on mutual trust, accountability,
participation and creativity. The GB uses credit both as a cost effective weapon to fight
poverty, by issuing employment creation loans and as a catalyst in the overall upliftment of
the poor living under the most depressed socio-economic conditions.

The GB has inspired people and institutions throughout the world . In the last decade, more
than 4000 people from 100 countries have participated in Grameen=s training/exposure

 Grameen means A Village but the term Grameen Bank is popularly known as the poor
peoples bank

This document was prepared by Vishwas Satgar, Executive Director of the Co-operative and Policy Alternative
Center(COPAC). 2003
programmes. Some of these visitors succeeded in replicating the GB=s financial system to
help the poor overcome poverty in their own countries. At present 233 Grameen replication
programmes in 58 countries including South Africa have already been established.2

Many independent studies3 have demonstrated the GB=s positive impact on its borrowers in
terms of income, wealth creation, nutrition , housing , family planning and education of
This study is divided into three sections. The first, which follows below, sketches out the
methdology of this study. The second section provides insight into the co-operative banking
model and the third section focuses on the Grameen Bank model. The fourth and final section
provides a set of policy recommendations to be considered by the Midrand Council.

2. Methodology

This research project drew on a wide range of academic literature that documents the
institutional design, operations, successes and failures of Co-operative Banks and the
Grameen Bank. This comprehensive literature survey, which has formed the core of the
methodology, yielded both qualitative and also relevant tertiary and secondary quantitative

 In addition the methodological design of this research project tapped into the wealth of
practical experience that exists in South African co-operative banks. In this regard, use was
made of unstructured and semi-structured interviews. Both executive officers of the umbrella
co-operative organisations, in the urban and rural areas, where interviewed face-to-face, as
well as, management staff in two village co-operative banks in Zeerust and one urban based
co-operative bank, in the Cape Metropole.

In the third instance, this project accumalated a wealth of relevant information like model
statutes and evaluation studies which where incorporated into this study through a proper
documentary analysis.

Finally, the methodology of this project incorporated sourced information from the inter-net.
The Web-site of the World Council of Credit Unions was used extensively, as well as, the
website of the South African Credit and Cooperative League of South Africa (SACCOL) Ltd.
and other relevant readings where down loaded and used in the study.

    Source Internet Website,
This document was prepared by Vishwas Satgar, Executive Director of the Co-operative and Policy Alternative
Center(COPAC). 2003
                                                     Section - II
3. The Co-operative Model

This study focuses on Savings and Credit Co-operatives affiliated to the South African Credit
and Co-operative League (SACCOL) Ltd. and village based Financial Services Co-
operatives (VFSC) affiliated to the Financial Services Association (FSA).

3.1 A Brief History of Co-operative Banks

The first co-operative credit society, or “People’s Bank” as it was known, was established by
a German civil servant, Hermann Schulze-Delitzsch, in 1850. In 1864, Friedrich Raiffeisen,
the mayor of Heddesdorf, Germany, formed the first credit union. Raiffeisen also established
the first credit union central bank in 1876, and a year later, an organization for credit unions –
a federation.

Since then the idea of co-operative banks or credit unions spread rapidly to other parts of the
world. In 1971 this lead to the formation of the World Council of Credit Unions as a global
representative of the movement, a provider of services and a forum for the exchange of
information. By 1997, the World Council represented 85 national credit union movements
with nearly 90 million credit union members, worldwide. The actual breakdown per region is
as follows :

Region                              Credit Unions                              Members
Africa                               5, 582                                      2, 730, 147
Asia                                13, 988                                      8, 566, 474
Carribbean                              351                                      1, 026, 165
Europe                              1, 251                                       2, 502, 062
Latin America                       2, 035                                       5, 376, 194
North America                       11, 290                                    72, 578, 656
South Pacific                           342                                     3, 147, 181
Regional Totals                     34, 839                                    95, 926, 879
(Source : World Council of Credit Unions, Website)

There are 28 countries in Africa that have established credit unions. In May 1996, South
Africa became the 28th African country to become a member of the African Confederation of
Savings and Credit Co-operatives (ACCOSCA).

The SACCOL co-operatives, in South Africa, have their origins in the Cape Credit Union
League (CCUL) which was formed in 1981. At this time various Catholic church parishes
decided to form Credit Unions and the CCUL was formed to help them coordinate their
activities and standardise their operations. Two major problems plagued these cooperatives :
First, they paid out low interest on savings and hence members where not interested in saving
but where only interested in the cheap loans. Second, most people where scared to take up
leadership positions because of state repression during this period. In 1987, the CCUL
extended its activities outside the Western Cape Region and formed itself into the South
African Credit Union League. The problem of non-viable SACCOs still existed and in 1991,
when the World Council of Credit Unions did an assessment of the viability of the movement,
in South Africa, they found only three of the existing 47 SACCOs were viable. Consequently,
This document was prepared by Vishwas Satgar, Executive Director of the Co-operative and Policy Alternative
Center(COPAC). 2003
a debated ensued within these SACCOs and the viable cooperatives argued that making a
surplus and developing strong SACCOs was in members interests in the longer term, rather
than short term gain of cheap loans only. Thus the Savings and Credit Cooperative League of
South Africa (SACCOL) was born in 1993. Today, there are 21 Savings and Credit Co-
operatives (SACCOs) that are based in urban areas within South Africa, with 16 being paid
up members of SACCOL4.

3.2 Overview of the South African Co-operative Models

Both the Savings and Credit Co-operatives (or SACCOs) and Village Financial Services Co-
operatives operate through exemptions from the Banks Act of 1990.

Through a Government Gazette (Vol 354, No 16167, December 1994) the South African
Reserve Bank recognises SACCOL as the representative of Savings and Credit Unions n
South Africa. SACCOs, on condition they abide by the SACCOL constitution and SACCO
statutes, receive an exemption from the Banks Act of 1990. According to David De Jong5 the
thrust of the exemption is fourfold :
(1) every SACCO must have a defined common bond of association like a village, town or
    city or workplace or occupation or religion;
(2) if it has an asset size less than 1 million it must be audited by an accountant and if it is
    over a million you need an external audit;
(3) SACCOs are not to be involved as a pension fund organisation and setting up an
    insurance product;
(4) SACCOs cannot be larger than R9.9 Mn in total asset size6;
In 1998 the exemption for the operation of Village Financial Service Co-operatives was
gazetted7. It provides the following common bond exemption under which co-operative
village banks can operate :

(1) activities shall be performed solely in respect of its members;
(2) in pursuit of its objectives of providing services to its members, this shall be done in a
    defined geographical area not serviced by banks; and
(3) within the geographical area defined in respect of such village financial service co-

In addition to this common bond exemption by the Registrar of Banks in the Ministry of
Finance, the village financial services co-operative also has to fulfill two other requirements
to come into existence. That is registration of village banks with the registrar of co-
operatives, in the Department of Agriculture, and affiliation with the Financial Services
Association (FSA), the umbrella association for the co-operative village banks, that provides
the necessary monitoring and supervising functions.

  David De Jong, Interview : November (1999).
  David suggests this is up for review with the Registrar of Banks
  See section 3. Wezi Ximiya also points in her interview that the exemption really stipulates a
10km radius. In other words, Village Financial Co-operatives can only be established outside
of this 10km radius from a commercial bank.
This document was prepared by Vishwas Satgar, Executive Director of the Co-operative and Policy Alternative
Center(COPAC). 2003
The broad theoretical model of Savings and Credit Co-operatives (or SACCOs) is grounded
in the following principles :
 it is owned and governed by members, who have shares in the co-operative and who have
    the same common bond: working for the same employer, belonging to the same church,
    labour union, social fraternity or living/working in the same community;
 membership is open to all in the common group and members vote and elect a board, to
    make overall management decisions, and also elect a supervisory committee to perform
    the function of an internal audit;
 Members save their money in the co-operative and make loans to each other at reasonable
    rates of interest. Interest is charged on loans, to cover the interest cost on savings and the
    cost of administration;
 SACCOs affilliate to SACCOL , an umbrella body that provides them with a host of
    services and training support.

From the data available, the membership and asset size of some of the SACCOL affilliated
SACOs are indicated below :

Name of SACCO                          Year Formed              Membership           Asset Size
Cape Metropole Savings                 1984                      700                 912, 000
and Credit Co-operative
Cape Metal Employees                   1994                     1 500                3, 2 Million
University of the Western              1993                      530                 1,1 Million
Itireleng SACCO                        1994                      350                 1,6 Million
Unilever Workers Credit                1995
Union                                                            540                 400, 000
Umanyano SACCO                         1996                      200                 309, 000
Alrode SACCO                           1995                      275                  430,000
Saveline SACCO                         1995                      200                  191,000
Campus SACCO                           1983                      200                  120,000
CTCB SACCO                             1994                      195                  130, 000
Anchor Tshiya SACCO                    1997                      150                   80, 000

(Source : SACCOL, Website)

At a theoretical level, the village financial service co-operative model, operates according to
the following principles :
 it provides basic banking services, like savings and credit facilities, to rural communities
    that are not served by the commercial banking sector;
 it is owned and controlled by local residents, who are shareholders and members;
 as owner-uses, the members organise, capitalise, operate and carry the risk of their bank
 every owner-user is entitled to use the bank’s service and votes for members of the
    Bank’s Board of Directors, which sets overall policy;

This document was prepared by Vishwas Satgar, Executive Director of the Co-operative and Policy Alternative
Center(COPAC). 2003
   Loans made by the bank must come primarily from the funds deposited in the bank by its
    shareholders. Loans are currently collateralised by the borrowers savings and those of
    other shareholders who agree to collateralise the individual loan;
   every village financial service co-operative has a link bank that stores the money of the
    village financial service co-operative in an account and the link bank provides support,
    training services and advice to the village financial service co-operative;
   all village financial service co-operatives have to be affiliated to the financial service
    assocaition that provides support, training and monitoring.
The village financial service co-operative model has the following profile in terms of
membership and asset size :

Name of Co-                  Year Formed                   Membership                    Asset Size
operative Village
Lehurutshe                   1999                          70                            33 269,63
Lothlakane                   1995                          253                           214 026,35
Motswedi                     1996                          575                           334 345,44
Kraaipan                     1994                          680                           1 065 891,23
( Source : Financial Services Association)

More recently, a fifth Co-operative Village Bank has been launched by the FSA but there is
no data available.

4. Essential Features of the Savings and Loan Delivery System

4.1 Membership

Any person can become a member of a SACCO provided they fall within the common bond
of the SACCO. To become a member of a SACCO a person has to pay a R30-00 joining fee
and thereafter a share, priced normally at R100-00, has to be purchased. The purchase of
shares cannot exceed more than 20% of all shares held by total membership. The other rights
and obligations of a members are governed by the statute of the SACCO but in the main
membership entitles a person to vote in a SACCO and also use the services of the SACCO.
The main benefits to membership are the following :
  As a user-owner a member shares in the profits made according to patronage;
  A savings interest rate is always set above the inflation rate to protect the value of the
     money saved;
  Loan insurance is provided which limits the risk of the co-operative;
  Loans are provided easily but have to be repaid through stop order deductions.

This document was prepared by Vishwas Satgar, Executive Director of the Co-operative and Policy Alternative
Center(COPAC). 2003
In a village financial services co-operative a person becomes a member within the common
bond provided they purchase a share at R10. One share entitles the member to one vote.
Sometimes the by-laws can provide for additional votes, purchased for five shares each. The
main benefits to a member in a village financial services co-operative are the following :
 Safekeeping place for cash;
 Savings opportunities;
 Credit access;
 The ability to transfer fund and receive remittancess;
 Retains wealth within the community and contributes to general economic progress;
 Attracts new capital into the village economy for general economic development.

This document was prepared by Vishwas Satgar, Executive Director of the Co-operative and Policy Alternative
Center(COPAC). 2003

4.2 Management and Administrative Structures

All members of a SACCO have one vote and this they use to elect a Board of Directors,
consisting of between 9 –15 members. From within a Board an Executive Committee is
constituted. The Board also appoints a Credit Committee and an Educational Committee.
Alongside the Board the members elect a Supervisory committee which is merely a watchdog
institution. The Supervisory Committee also appoints an auditor, that ensures the funds of the
SACCO are managed properly. Each SACCO also has a statute which confers certain powers
on the Board and which enables them to make policy and decide on the implementation
thereof through the various committees.

At an operational level or on a day-to-day basis, the SACCO might initially be managed by a
volunteer clerk, but as the SACCO expands the Board might decide to hire a manager. In the
Cape Metropole SACCO, expansion has further taken place with the manager employing a
receptionist and a data capturer. Within the Cape Metropole the manageress’s8 functions
include the following:

Managing the administrative staff and ensuring the decisions of the board are implemented. I
also make recommendations to the board. For instance, when a person is making a loan
application I prepare all the paperwork for the credit committee but I also include my
recommendations on the loan. Also, I have power to decide on loan applications that do not
exceed R2000-00. I also control the deposits and ensure that every member gets a monthly

Every shareholder and member of the Village Financial Services Co-operative, has a vote to
decide on the Board. The Board, comprised of (7-11) members, normally has seven portfolios
comprised an executive of three (sometimes a Chariperson; secretary and treasurer) and a
marketing portfolio, an auditing and investment portfolio, loans and security. In general and
as derived from the statute, the board sets policy for the co-operative The board ensures
regular audits to maintain proper financial management and control, processes loan
applications through a loan committee and employs an administrator. The administrator acts
as an operational manager and can employ other administrators. The functions of the
administrator9 include some of the following tasks :
Receiving cash deposits, filing deposit slips and withdrawal slips, tally receipts and payments
then record in cash book each day, keeping proper ledgers for shares and savings, managing
withdrawals, reporting to the board, working with the loan committee and interacting with
the link bank.

4.3 Savings and Investment Policy

 Harriet Stewart, Interview: November, (1999).
 Charles Moiloa, Administrator Lehurutse Financial Services Co-operative, Interview:
December, (1999). Also in Shadrack Kgosimang, Administrator Motswedi Village Bank,
Interview: December, (1999).
This document was prepared by Vishwas Satgar, Executive Director of the Co-operative and Policy Alternative
Center(COPAC). 2003
In a SACCO members have to save monthly. A minimum of R50-00 per month is

Most members are encouraged to save through monthly deductions of payroll.

SACCOs provide members with Life Savings insurance which gives members beneficiaries
double their savings should they die.

Members save through different products10, such as :

    Term Deposits – SACCOs are offering members one year fixed deposit accounts at
     interest rates varying between 12 – 15%;
    Xmas Savings – Most SACCOs, even the smaller ones, have introduced this product to
     their members. Members make 11 contributions in the year from January to November
     and receive an interest of up to 12% on their contribution;
    Educational Savings – members save from February to January with the purpose of
     meeting the educational needs of family members each year.

The interest given on savings products is built into the cost structure of loans given by the

The FSA has ensured that the pilot FSVCs concentrate on building up a savings base in the
start up phase, to the extent that loans have not really been a major priority. Savings has
happened through a need that the people have in rural areas for a safe place to keep their
money. A lot of money comes to the rural areas as wage remittances or government welfare
transfers, mainly for pensioners.

A village bank savings book is issued to account holders, in which all transactions are

In the FSVC people save through open accounts and /or fixed deposits.

Currently a market related interest rate structure is paid on balances in open accounts ranging
from 2.7% for balances ranging between R200-00 and R499-00 up to 11% for balances over
R100-00011. The interest structure attempts to incentivise higher savings levels.

With the fixed deposits members have an opportunity for medium term investment and this
provides the village bank with a more stable portfolio for investment purposes12. At least 80-
90% of the savings investment portfolio is invested. This investment portfolio earns interest
through investments that are made with the link bank. This is also an important source of
finance for the FSVC. Every member receives a formal fixed deposit certificate when they
make a fixed deposit. The current interest rates are also market related ranging from 11% for
a three month fixed deposit, 11.5% for a six month deposit and 12% for a 12 month deposit.

   See SACCOL Website.
   Shadrack Kgosimang, Administrator Motswedi Village Bank, Interview: December, (1999).
   Schoeman J.H. (1996) at p. 4.
This document was prepared by Vishwas Satgar, Executive Director of the Co-operative and Policy Alternative
Center(COPAC). 2003

4.4 Loans Policy

It is one of the main objectives of SACCOs to provide loans to it members. The ideal model
invests 80% of mobilised savings to members in the form of loans. Loans exceeding R2000-
00 are processed through the credit committee. The major risk assessment criteria and
conditions are the following :
  A person has to be member for at least six months;
  Loans given to members will not exceed a 3 to 1 ratio based on members savings and
  An individuals saving record (particularly deductions through payroll), character and
      length of employment are also important;
  The maximum size of the loan is R15 000;
      If a member is having difficulties repaying a loan, this has to be discussed with the
      SACCO in order to provide for a workable arrangement.

Loans in a SACCO are provided for a host of purposes. Members can acquire loans from a
SACCO for productive, income generating activities, a business idea or towards a house.
Loans are also made for provident purposes such as school fees, funerals and weddings. Other
loans are made to improve the quality of life of members by allowing members to buy
furniture or appliances or other goods without having to carry expensive hire purchase

SACCOs also provide loan insurance which safeguards members in the case of death by
ensuring that the loan of the member is paid up.

The interest charged by SACCOs on loans varies between 25 and 30%. This is more than the
commercial rate charged by banks. Housing loans, for instance, are at 27% p.a. for a period of
3 to 5 years13.

Generally the FSVC have not engaged in credit or loan practices. According to Wezi
Ximiya14 only one village bank has given out loans – this is estimated to be about 16 loans. In
terms of the loan process the application is processed by a loans committee which uses the
following risk assessment format15 :
 To qualify the person has to be a member for at least 3 to 6 months;
 All loans will be subject to guarantees acceptable to the Village Bank, which will be in
    the form of collateral savings as well as guarantees provided by other members of the
    village bank;
 Own savings pledged as collateral will at least be 50% of the value of the loan;
 First loans will be subject to 100% collateral savings;
 Further loans may be granted for amounts in excess of the direct collateral savings,
    subject to acceptable guaranties provided by the applicant;
 The relation bewteen direct savings collateral and other guarantees will be subject to a
    credit evaluation by the Village Bank. The payment history of the borrower will be taken
    See Cape Metropole SACCO, Products Sheet.
   Interview : November (1999)
   Schoeman J.H. (1996) at p. 9.

This document was prepared by Vishwas Satgar, Executive Director of the Co-operative and Policy Alternative
Center(COPAC). 2003
      into account, when extending new loans and the collateral savings and loan ratio will be
      determined accordingly;
     The borrower will have to take out life insurance for an amount equal to the loan;
     All late payments will be subject to interest charge for the period of late payment;
     Collateral savings and guarantees will be called upon in the event of payment in areas of
      31 days;
     Extention of repayment will only be provided if the outstanding interest is paid on
      outstanding loans;
     All loans will be subject to a loan fee of 5% of the loan amount with a minimum R50.00;
     Loans will be granted to members on a monthly basis to the value not exceeding 1/6 of
      the total credit prortfolio
     Loans will be granted for periods not shorter than one month and not longer than 12

The FSVC charges interest at 25% per annum for loans. This is lower than most private
micro-lenders who use a cost structure of between 30% - 35%. Commercial banks borrow
from the Reserve Bank at the repo rate, which is currently at 12.2 % and they lend out to
borrowers. The biggest borrowing sector is for housing and currently the cost is 15.5%.
Prime, which is the borrowing rate for businesses, is 16.5% currently. Others borrow at prime
plus 2% which amounts to 18.5%. The FSVC charge a loan rate higher than commercial

5. Training

SACCOL offers three16 types of training to ensure capacitation and sustainability of
SACCOs. These are structured as follows :

     Start-Up Manual - which has three components. The first deals with the nature of
      SACCOs, model statutes, bookkeeping and annual general meetings. The second
      component covers loans and investment policy, the central finance facility and insurance.
      A third component looks at computerisation, developing a business plan, employing staff
      to run a SACCO and registering your SACCO. The cost of a start-up manual is R499-00;

     Distance Based Education Modules – which SACCOL has developed in conjunction
      with the Centre for Continuing Education (CACE) based at the University of the Western
      Cape (UWC). The modules are targetted toward SACCO Boards and staff members
      development. The modules cover the following areas : Introduction to SACCOs; SACCO
      strucutres; Roles and responsibilities of Directors; Board/ Management Relations;
      Member Relations; Financial Statements; Financial Analysis; Financial Goals and
      Planning; Risk Management and SACCO Lending. This syllabus can be flexibly made up
      to suit the needs any interested institution. The materials can be purchased from SACCOL
      at R499 or outside individuals or organisations can buy the material R1,000. Individual
      modules are available to members at R100 each while non-members may purchase these
      at R200 each;

     See SACCOL Website.
This document was prepared by Vishwas Satgar, Executive Director of the Co-operative and Policy Alternative
Center(COPAC). 2003
     Centralised Training Sessions - which allows SACCOs to come together to share
      experiences. SACCOL holds centralised training sessions once a month on selected
      topics. SACCOs pay for their board members to attend these training sessions at a cost of
      R50 per person per session. SACCOs not able to attend a session can request on site
      training for R100 (min 6 people).

Training and back-up offered by the FSA and FSVC entails the following :
     Capacitation training and education – which includes educating the community on the
      need for the Village Bank, feasibility study, business planning and recruitment strategy;

     Training from link bank for risk assessment, management and investment opportunities17;

     The FSA arranges training for administrators at technikons and other tertiary institutions.

6. Financing

6.1 Start-up costs

Ideally to start-up a SACCO some of the following costs have to be incurred :

COST ITEM                                                  ESTIMATED COST
1. Start-up kit                                            R 500 – 00
2. Five day capacitation workshop (30/50
 Transport and Accomodation Costs for                     R 3000 – 00
 Facilitation @ R1000 per day                             R 5000 – 00
3. Training manager over two week period
@ R1000 a day plus transport and
accommodation in Cape Town                                 R 15000 – 00
4. Computer and software                                   R 7000 – 00
5. CUBIS software                                          R 16000 – 00
6. Safe (fire-proof)                                       R 8000 - 00
7.Desk/Chairs/Filing Cabinet                               R 15000 – 00
8.Rental (Prime Space @ R4000 p.m)                         R 48000- 00
Estimated Total Cost                                       R 117 – 500

In total, start –up costs for an ideal model, are estimated at : R117 500

However, in practice, when starting up SACCOs spend according to income earned, normally
profits on loans. In other words, as profits increase they would attempt to expand and acquire
equipment or premises or training and so on. At the beginning SACCOs normally work with
volunteers from the board and might work out of a members house and hence start up costs
are kept to minimum. In addition, SACCOL is flexible on the fees it charges for capacitation
     Wezi Ximiya, Interview: December (1999)
This document was prepared by Vishwas Satgar, Executive Director of the Co-operative and Policy Alternative
Center(COPAC). 2003
and training and depending on the group it is working with, it would charge accordingly. Also
the software – CUBIS - is normally paid for through a monthly scheme of R1 per member
every month. Normally furniture and equipment is also donated and rental for offices should
not exceed R1000-00 per month.

This document was prepared by Vishwas Satgar, Executive Director of the Co-operative and Policy Alternative
Center(COPAC). 2003

The estimated start-up capital for a FSVC is about R30 000 and this is provided by the FSA.
This amount is divided up as follows :

Risk Fund                       R10 000
12 Month Salary                   6 000
Fireproof safe                    8 000
Filing Cabinets / Chairs/ Table    6 000
          Total          R 30 000

In short, it is much more cheaper to set up a FSVC. Also the fact that the local village
authority, probably a chief, gives the property or premisses for the village bank which reduces
costs dramatically.

6.2 Operational Costs

According to David De Jong, in an ideal model economic viability can be assessed using the
following assumptions :

Start –up with 800 members
Average saving R100-00 p.m
Annual Savings per member R1200-00
Total Savings Mobilised p.a. R960 000

If lend 80% (R768 000) at interest rate of 25 %, should generate about R190 000 income
before expenses. If pay members 8% on savings, then amount left over to cover expenses is
calculated as follows : 25% on loans subtract 8% on savings equals 17% of R190 000. This
equals about R32 300. After subtracting this from R190 000 this leaves approximately R157
700 left to cover all other operating expenses. Expenses in a well managed SACCO should
not exceed 10% of income. Normally non-financial or operating expenses include the
following items:

Salaries and benefits
Rent and utilities
Committee expenses
Comp.Acc. System
Bank Charges
Transport Allowance
Audit Fees

This document was prepared by Vishwas Satgar, Executive Director of the Co-operative and Policy Alternative
Center(COPAC). 2003
Based on this simple model total operating expenses should come to about R15770. After
subtracting this from total income this leaves the SACCO with a surplus before tax and
deductions for loan loss at R141 930. In short, economic viability will hinge on a number of
factors, that is , the number of members in the SACCO; the average savings per member; the
interest rate on savings; the interest rate on loans and the percentage operating expenses
constitute of gross profit.

According to Wezi Ximiya a FSVC is only opened once it has between 2 to 300 members. At
the same time, with a strong emphasis on savings mobilisation rather than loans, financial
viability particularly the capacity of FSVC to meet their operating expenses, has been
achieved within a 12 month period or less. From experience, Wezi Ximiya18 points out that it
took Kraaipan 18 months to achieve a critical mass, then subsequently the next FSVC took 12
months and finally the third took 6 months. The key to sustainability is mobilsing saving
which in turn is re-invested, thus earning interest which covers the operating expenses of the

7. Main Weaknesses and Strengths

7.1 Main Weaknesses

Failure to Mobilise Depositors – without an ongoing recrutiment and mobilisation drive for
depositors both the SACCOs and the FSVC can run into problems. Savings are the life-blood
of the institutions and enable lending. Therefore concerted attempts to broaden the
membership base and ultimately savings volumes is imperative;

Failure of the link bank – within the FSVC model the village bank is conceived more as a
compliment to the commercial banks and does not attempt to replace them. In this regard it is
expected that the link bank would provide a host of supports and training. In practice this kind
of support and training has been uneven and has not played a decisive role in most of the
village banks;
Information technology - is not widely used in the FSVC. While this may not be an
immediate necessity it does inhibit expansion and the development of more sophisticated

Government Support is Limited – both the SACCOs and the FSVC have come into existence
through exemptions to the Banks Act and registration under the co-operative legislation.
However, to a large degree the regulatory framework has been restrictive, particularly for
FSVC. Also government has not considered providing cheap money to the co-operative
banking movement through the Reserve Bank, as being a priority. At a simple level
government would not even keep any of its accounts with anyone of these institutions.

7.2 Main Strengths

People Centred Banking Practices - In the SACCOs, while they charge a loan rate above
commercial banks they still operate in a less rigid framework in terms of cost recovery. In
that, the members given the loan can negotiate flexible repayment if they are experiencing

     Interview : December (1999).
This document was prepared by Vishwas Satgar, Executive Director of the Co-operative and Policy Alternative
Center(COPAC). 2003
difficulties without having their collateralised savings called in. With the FSVC the priority is
to pay back the interest owing for the period missed in terms of repayment and this then
allows some kind of flexibility vis-à-vis collateralised savings, guarantees and assets. In short,
however this kind of people centred lending practice distinguishes the SACCOs and FSVC
from commercial banks;

Members Include Institutions – members of the SACCOs and the FSVC are not just
individuals but also organisations and institutions like stokvels, burial societies, trade unions,
local governments and even other co-operatives. In this regard the co-operative banking
model can broaden its depositor base and also make the linkage with savings and investment
in development;

Operating Costs are Low - compared to commercial banks hence the co-operative model can
easily achieve self sufficiency, in terms of profits made on loans or even savings portfolio

The Co-operative Value is an Asset - in that lending to members who know each other puts
pressure to pay back and this lowers the default or delinquency rate dramatically. All that is
required to ensure a member defaulting starts repaying, is a few phone calls and one or two
letters as reminders and this normally leads to some kind of arrangement being reached with
the co-operative. In short, the co-operative value of working together and sharing the risk
collectively translates into an asset which reduces the risk assessment;

Increasing Financial Self Sufficiency – since 1997 the SACCOL has not been supported by
donor funds. This is largely due to the expansion of a central financial facility (CFF) which is
a central fund where SACCOs deposit ten per cent of their assets. From this 10%, one percent
is invested in shares and the other 9% is considered as a compulsory deposit. The SACCOL
invests the pooled funds centrally and can negotiate higher returns for member SACCOs. The
main objective of the CFF is to invest money back into the SACCO. At present 50% of this
fund is invested in financial institutions and 50% is available to SACCOs in the form of
loans. In short, the CFF operates as a Reserve Bank to the SACCOs and allows them to obtain
cheaper money for loan purposes. Similarly, the FSVC through building up their savings base
and stable investment portfolio are able to provide loans in a more self sufficient way without
seeking finance elsewhere to lend to members.

This document was prepared by Vishwas Satgar, Executive Director of the Co-operative and Policy Alternative
Center(COPAC). 2003

                                                Section - III

8. The Grameen Bank

8.1 The Vision

The dual vision of offering a banking service to the poor and of poverty alleviation is
accurately captured by the following list of objectives that the GB leadership presented to
donors in 198819.

     to extend banking facilities to the poor;
     to eliminate exploitation by money lenders;
     to create small enterprise opportunities for the unemployed and underemployed
     to bring disadvantaged people within the fold of some organizational format which they
      can understand and operate and can find some socio-political and economic strength
      through mutual support;
     to reverse the age old [poverty] cycle of “low income, low savings, low investment, low
      income”into an expanding system of “low income, credit, more income, more credit,
      more investment, more income”.

Note that the objectives begin with the specific input of credit facilities for the poor and move
through the intermediate goal of elimination of exploitation by moneylenders, expansion of
self employment and empowerment through group formation, to a new state that transforms
the downward cycle of poverty into an expanding spiral of growth and development.

8.2 Overview of the Grameen Bank Model

The GB views credit as a cutting edge tool for affecting those inequalities that confine the
poor to a poverty cycle and for releasing the inherent capacities of people. The GB sees
access to credit as a form of social power which has been denied to the poor because they
lack collateral. Professor Muhammad Yunus argued that the conventional banking system is
A anti-poor, anti-women and anti-illiterate@ and thus has contributed to maintaining the status
quo between the rich and poor (1998: pp 75-80) . Thus microcredit issued to small groups,
enables them the opportunity to purchase equipment and other inputs and engage in micro
enterprises of their choice, thus empowering them to escape from the vicious poverty cycle.

The GB is based on the voluntary formation of small groups of five people to provide mutual,
morally binding group guarantees in lieu of the collateral required by conventional banks.
Women were initially given equal access to the schemes, and proved to be not only reliable
borrowers but also astute entrepreneurs as well. As a result, they have raised their status ,
lessened their dependency on their husbands and improved their homes and the nutritional
and education standards of their children. Today 95% of the borrowers are women.

Intensive discipline, supervision and servicing, characterise the operations of the GB, which
are carried out by Abicycle bankers@ in branch units with considerable delegated authority.
The rigorous selection of borrowers and their micro enterprises by bank workers, the powerful
     Holcombe Susan. Managing To Empower. London & New Jersey (1995).
This document was prepared by Vishwas Satgar, Executive Director of the Co-operative and Policy Alternative
Center(COPAC). 2003
peer pressure exerted on borrowers by group members and the repayment scheme based on 50
weekly instalments ,contribute to the operational viability to the rural banking system
designed for the poorest of the poor. In addition savings are encouraged . Under the scheme
5% of the loan amount is credited to a group fund and 25% of the interest payment is
contributed towards the groups emergency fund, which provides insurance coverage against
default, disability, death and other accidents. The GB lends at a commercial interest rate of
20% per annum.

The success of the above approach shows that a number of objections to lending to the poor
can be resolved if careful supervision and management are provided. For example , many
believed that the poor cannot find viable micro enterprises, however Grameen borrowers
have successfully done so. Many believed that the poor would not be able to repay, however
repayment rates reached 98%. It was thought that the poor rural women were not bankable, in
fact, they account for 95% of the GB borrowers. Many believed that the poor cannot save,
group savings has proved as successful as group lending. It was believed that the rural power
structures will make sure that such a bank failed. To the contrary the GB has grown from
fewer than 15000 members in 1980 to 2.34 million (2.24 million women) in 1998. Group
savings has reached $162 million of which $152 million was saved by rural women20.

It is estimated that the average household income of GB members is about 50% higher than
the target group in the control village and 25% higher than the target group nom-members in
the GB villages. The landless have benefited most, followed by marginal landowners. Thus
there has been a sharp reduction in the number of GB borrowers living below the poverty
line, 20% compared to 56% for comparable non-GB members. There has also been a shift
from agriculture wage labour (considered to be a socially inferior) to self employment in
micro enterprises. This shift in occupational patterns has had an indirect positive effect on the
employment and wages of other agricultural waged labour21. Thus the GB initiatives have
grown to the point where it has made an impact on poverty alleviation at the national level.

9. Essential Features of the Savings and Loan Delivery System

9.1 Exclusive Focus on the Poorest of the Poor
Exclusivity is ensured by:

   establishing clearly the eligibility criteria for selection of target group and adopting
 practical screening techniques to exclude those who do not qualify. Since mixing
of different income groups tend to result in the higher income groups ousting
the low ones.

     Women are given priority, since their empowerment has a greater positive impact on the
      family and they have proven to be disciplined and astute entrepreneurs.

     The delivery system is geared to meet the diverse socio-economic development needs of
      the poor housing, education, nutrition, family planning, economic development etc.

     Statistics taken from Grameen Bank website
This document was prepared by Vishwas Satgar, Executive Director of the Co-operative and Policy Alternative
Center(COPAC). 2003
9.2 Borrowers Organised into Small Homogenous Groups

   Organising the primary groups of 5 members and federating them into centres has been
the basic building blocks of the GB=s credit delivery system.

    On the outset the emphasis is on building strong grassroots borrower organisational
     structures, this is the means of empowering and enabling borrowers to develop the
     capacity for planning and implementing micro level development decisions.

     Centres are functionally linked to the GB via the field workers , who have to officiate at
      compulsory centre meetings on a weekly basis and present weekly reports to their

    A policy of replacing traditional collateral with social collateral , by making a group
     of five borrowers responsible for each other=s loans. Group pressure forces members to
     conform to the payment agreements.

9.3 Loan Conditions Specially Tailored for the Poor

The key to the Bank=s success was the achievement of a simple to operate loan mechanism
that all borrowers understand almost immediately:

    Very small amounts of loans given without any collateral.

    Loans payable in small 50 weekly instalments spread over a year.

    Access to larger subsequent loans dependent on repayment history

    Individual, self chosen , rapid income generating activities, employing skills that the
      borrower is already equipped with.

    Close supervision of credit utilisation by the group as well as the bank staff.

    Stress on credit discipline and collective borrower responsibility (peer pressure)

     The adaptation of financial services to suit local demand through >regular door-to-door

     Compulsory (borrowers are compelled to save a minimum of 67cents22 in SA currency
      per week) and voluntary savings schemes to minimise income fluctuation risks that
      usually confront the poor. Savings implies that borrowers are paying a higher effective
      interest rate thus allowing the GB to charge only 20% on micro enterprise loans .

    Transparency in all bank transactions most of which occurs at centre meetings.

    .$1=45.45 taka =R6.15, borrowers are forced to save 5taka per week

This document was prepared by Vishwas Satgar, Executive Director of the Co-operative and Policy Alternative
Center(COPAC). 2003
9.4 Undertaking Social Development Programs to Address Basic Needs of the Poor

This is reflected in the Asixteen decisions” 23 adopted by the GB borrowers. This helps to:

     raise the social and political consciousness of the newly organised groups

     focus increasingly on women from poorest households, whose survival urges
      has a far greater bearing on the development of the family.

     empower the poor to take care of their own basic needs - housing, sanitation
      drinking water, education, family planning etc.

     The development of a broader social upliftment programmes, which includes the building
      of houses and schools, undertaking of large economic projects eg. Textiles, fisheries and

9.5 Design and Development of a Credit Conducive Organisation and Management
System Capable of Servicing the Poor

     The system has evolved gradually through a structured learning process that involves
      trails and errors and continuous adjustments. Special training programme has evolved,
       to screen, train and develop highly motivated and progressive staff members, so that
       decision making and operational authority is gradually decentralized and administrative
        functions delegated at the zonal level downwards.

     A dedicated and committed workforce achieved both through rigorous practical
      management training programmes and market related remuneration packages .

     The management style of top and middle management not only supports but also
      empowers field workers and branch managers. At the branch level workers enjoy
      considerable delegated authority.

9.6 Expansion of the Loan Portfolio to Meet Diverse Development Needs of the Poor

As the general credit programme gathers momentum and the borrowers become familiar with
credit discipline, other loan programmes are introduced to meet the growing social and
development needs of borrowers. Apart from housing projects which are well established,
such      programs include:

     credit for building sanitary latrines

     credit for installation of tubewells that supply drinking water and irrigate kitchen gardens

     credit to buy agricultural inputs for seasonal cultivation
     See Appendix A.

This document was prepared by Vishwas Satgar, Executive Director of the Co-operative and Policy Alternative
Center(COPAC). 2003

   finance projects undertaken by the entire family of a seasoned borrower.

   Loans for the purchase of equipment and machinery

9.7 Strategic Market Orientated Credit Policies

Apart from the above policies , the following also contribute significantly towards GB=s

   market related interest rates that cover costs, GB charges 20% interest pa., of which 5%
    is contributed toward a group fund to cover risks.

   A moderate subsidy dependent index (the amount by which interest rates need to be raised
    in order to remove subsidies).

   Protection of loan funds from inflation by depositing dormant funds in commercial banks
    that earn competitive interest rates and by engaging in bond trading.

Some researchers have posited the notion that the Grameen Bank=s success lies in its
organizational policies. The organizational structures may be split into three hierarchical
levels viz.,the local people=s organization ie. centres, the field organization comprising
branches and area offices and support organizations comprising of zonal offices and

9.8 The Organisational Structures and Functions

New recruits are required to form into a group of at least 5 members then each prospective
member has to undergo training in order to understand what the Bank is all about. Before
gaining acceptance into the Bank each member has to separately undergo an oral exam (85%
of rural women are illiterate), if any member fails then the group=s acceptance into the bank
is stalled until exams are retaken. This process not only ensures that the most desperate
qualify for loans, since the moderately well off will avoid such difficulties, but also
encourages group participation and empowerment of women. Moreover this approach
commits them to the GB before they could borrow. Loans are first extended to only two
group members , if they pay regularly for the next six weeks , then loans are granted to a
further two members, the group leader receives her/his loan last.

Branch Formation and Management

Six groups (each group has 5 members) constitute a centre which meet weekly. A branch
typically served a cluster of 120-150 centres . Each branch was managed by a team of 6
workers (2-3 trainee assistants , an accountant and a branch manager). Branches are
supervised and supported by the area offices , zonal offices and the headquarters. A branch
worker served 10 centres 5 days a week. During mornings the branch worker attends two

This document was prepared by Vishwas Satgar, Executive Director of the Co-operative and Policy Alternative
Center(COPAC). 2003
centre meetings and collected savings/loan installments. He/she then visits the same centres in
the afternoon to check on the utilization of loan monies and the performance of all ongoing
loan activities. Moreover each case of nonpayment of savings/loan are followed up.

Branch Supervision

The Branch Manager makes supervisory visits to different centres and checks the physical
utilization of loan monies for at least 20% of all loans. Furthermore he/she makes on the spot
checks on the performance of Branch Assistants and also ensured that Bank Assistants and
Group Leaders did not discriminate against any member. At the time of a loan disbursal,
he/she personally enquired about the loan activity and ensured that the borrower understood
all the conditions of the contract. Every month he/she also checks and countersigns each
members account book to ensure that amounts of cash collected were correctly entered. Each
branch prepares detailed weekly reports on branch performance. Worker and centre
performance were also reviewed so that it became the common knowledge of all staff

Loan decision process

First Phase

The process begins with the eligible member identifying a micro enterprise she/he wants
financed and the estimated amount of capital required. The proposal is discussed within the
group at weekly centre meetings which the Bank Assistant attends. The group, centre and
Bank Assistants offer suggestions and encouragement and give advice on the appropriate
amount of the loan. The Bank Assistant assists the member in filling a preliminary loan
application form (form 2) .

Second phase

The loan is discussed once again at the group and centre meetings for final approval before
recommendations are made to the Branch Manager. If the Branch Manager agrees to the loan
proposal, he/she then prepares a final loan proposal (form 2A) which is sent to the area office.
At the area office the proposal is checked by the Program Officer and sent to the Area officer
who authorizes the Branch Manager to disburse the loan. Very rarely are the loan
recommendations of the Branch Manager turned down .The entire process takes 2 to 4

New Branch Formation

Grassroots contact

Before opening a new branch, the bank sends a two person team, made up of an experienced
and trainee branch manager to live among the people and to undertake detailed consultation
with the people. After about two months of grassroots contact , members are enrolled and
trained. After a year the trainee manager is usually deployed elsewhere. Note the setting up of
a branch office involves minimal costs since local government premises or school buildings
     Holcombe, op. cit.,
This document was prepared by Vishwas Satgar, Executive Director of the Co-operative and Policy Alternative
Center(COPAC). 2003
are used, where ever they exist, otherwise unused land is cleared and a simple wood and tin
structure is set up, together with the assistance of borrowers

Work in a Slow Thorough Manner

Moreover when bank workers first enter the area they first undertake a detailed socio -
economic analysis of the area. They then, quietly (they try not to upset the local political
,social and religious authorities) go about forming few groups at a time. In the first year
according to Professor Yunus, they should form not more than 20 groups ie., a maximum of
100 borrowers. Professor M Yunus stresses the importance of going slow when first
attempting to start a branch , since it takes about 2 years before any structural defects are
found.i He further adds that the objective is to develop a system that works , Anot rush out at
breakneck speed@ 25

However according to the Bogra Zonal manager a bank assistant (field worker) can form
about 2 groups but not more than 4 groups a month ; a branch could organise up to ten centres
a year. It is expected that a branch will form 100 groups in the 1st year ; 200 in the 2nd year
and 300 in the 3rd year.26

Middle and Top Management

Leadership=s Vision

Grameen leadership has an expressed commitment to building and maintaining an
organisational culture that fosters learning and experimentation. They encourage openness,
questioning, consultation listening and a team approach to problem solving thus reflecting the
assumption that all individuals have an inherent capacity to contribute to deliberation and
decision. Since they believe in the capacity of the staff , the leadership expect disciplined
performance or professionalism. They expect responsibility and accountability. These views
are constantly echoed by both the Grameen senior leadership and Area Managers.

Area office operations

A group of 10-15 branches are supervised by an Area Manager and assisted by a Programme
Manager and a Housing Officer who mainly supervised the house building programme
supported by a housing loan scheme. The Area and Programme Managers , between them,
make at least two monthly supervisory visits to each branch. Since they are responsible for
approving the recruitment of new members trained by Bank Assistants, they keep tabs on how
each worker conducted training groups , worker=s relationship to group members and how
they deal with problem cases in the field. The Area Manager through attending many weekly
review branch meetings developed a indept understanding on performance of the centre and

     Mohammad Yunus, op. cit., pp 142-143

This document was prepared by Vishwas Satgar, Executive Director of the Co-operative and Policy Alternative
Center(COPAC). 2003
branch level staff and also the number of problematic individual borrowers. Another
important function of the Area Manager together with assistance from headquarters was to
maintain cordial relationships with the local political elite without compromising the
independence of the Bank.

Support organization

Zonal offices and central headquarters provided support and guidance to the field
organization. A zone covered 10-15 area offices and 70-115 branches. Zonal offices cover
most administrative decisions including performance appraisal and promotion
recommendations. The zonal managers main function was to keep track of personnel issues.
Often she/he also attended centre meeting in order to maintain contact and get feedback from
members directly.

 Since 1988 the Bank introduced the position of an >ombudsman= chosen from officers of
the area zone. They were responsible for investigating complaints against bank staff before
any disciplinary action could be taken.

Core function

The zonal office monitor the flow of each branch=s funds on a weekly basis. Detailed
operating information received by branches are compiled and processed. Monthly statements
on fund flows , different types of savings and the organization of group/centres for each
branch/area are also prepared. Special reports on overdue loans are prepared for the zone and
branch managers using the Management Information System (MIS). This is a computerized
information recording and feedback system that automatically activate error corrections and
overdue loan reminders.

In order to ensure that all field functionaries have a common understanding of the Bank=s
philosophy and policies , zonal managers make themselves available for discussions and
consultations. Moreover they hold separate two day annual workshops for three categories of
employees viz., branch workers, branch managers and zonal managers respectively. The
purpose of these workshops is for policy clarification, resolving personnel issues and for
obtaining feedback for formulating new policies.

Head Office Functions

Branches made annual operational projections in regard to all its activities. These proposals
were first viewed by the zonal office then by head office who carried out financial feasibility
and conformity assessments in relation to the Bank=s overall priorities. Once approved,
budgeted funds are released to zonal offices for disbursal to branches as per operational need.
The main function of the headquarters is to disburse resources (personpower, money,
equipment) to field offices.

Policy Adoption Through Workshop

This document was prepared by Vishwas Satgar, Executive Director of the Co-operative and Policy Alternative
Center(COPAC). 2003
Twice a year a 6 day workshop attended by zonal managers and senior head quarters staff is
held to assess the performance of different zones and headquarter divisions. All policy
proposals are also discussed and before large scale adoption , proposals are first implemented
at a few branches for testing its feasibility and staff reactions. Only after the trail run is
carefully analysed is the policy fully adopted.

Communicating Vision

On one hand the chief function of Headquarters is to uphold the vision and purpose of the
Bank, and on the other , to minimize the alienation between individual staff members and the
organization as a whole. Hence active communications with field workers is the core function
of headquarters. This is reflected in top management being sensitive to the field conditions
and the problems of field workers.

In one case study the managing director who lived a very simple life style spent
approximately 100-150 days per year visiting field workers and staff members, interacting
with them and ensuring that they understood the policies and perspectives articulated by top
management. The General Manager(Training and Special Programmes) who is second in
command describes himself as a Acheer leader@. The MD and his team receive over 500
monthly qualitative reports from field workers which they process, compile and issue

10. Recruitment and Training of Bank Workers

The Bank recruited college or university graduates largely either as bank workers ( field
workers) or trainee branch managers. Most other positions are filled through internal
appointments. Recruits undergo a rigorous six month training programme that focusses on
the following four aspects:

   coping with and getting used to the physical hardship of branch level field work, much of
    which in involves traversing the villages on foot or bicycle, all year round.

   familiarizing themselves with Bank procedures and different record keeping formats.

   developing a sense of pride in the work of the Bank. Their 1st assignment is to compile
    two detailed case studies of how loan activity has transformed the lives of the poor.

   the classroom component involves self learning through guidance from seniors and
    practical experience. Despite scarce employment opportunities in Bangladesh the trainee
    dropout rate is typically 50%-60%.

10.1 Incentive Schemes For Bank Workers

The Bank matches commercial banks ito. salary and other fringe benefits. Every 3-4 years
employees gain promotions. The Bank follow a policy of rotating its staff in different
positions thus multi-skilling and offering them a wide range of experiences. Senior staff
including the computer specialists, accountants and trainers, were once either field workers or
branch managers. All training centre functionaries were at one stage area/zonal managers and

This document was prepared by Vishwas Satgar, Executive Director of the Co-operative and Policy Alternative
Center(COPAC). 2003
most of them will go back to performing these duties after a while Upward mobility and
personal development are vitally linked to the phenomenal growth of the Bank. To the extent
that these avenues diminish in the future, the Bank has to devise new strategies.

11. Financing and Economic Viability

Tammen (1990) argues that the GB is not self supporting and is only able to break even, due
to substantial subsidies it receives from principal donors, according to her estimates the
implicit subsidy to borrowers is 39% based on the actual cost of funds and 51% if one
considers it from the opportunity cost angle27.

Jackelen and Rhyne (in an unpublished paper quoted by Holcombe) concur that the GB is not
a profitable bank, however they maintain that financial self-sufficiency can be achieved. They
point out that the current interest rate (1990) of 16% is insufficient to cover the cost of funds
(6-10 percent pa.) available in Bangladesh plus overheads (14% pa.) and a margin for loan
loss. GB is able to subsidize loans because donors advance capital, at a low cost (2-3 percent
pa.), prior to disbursement allowing GB to earn a commercial interest rate28.

11.1      Latest Information on the Cost Of Funds

According to Professor M. Yunus the loan velocity of circulation has been more than six
times, ie. each taka (Bangladeshi Currency, $1=45.45 taka) has been issued as loans at an
average of six times thus resulting in the optimization of loan funds and ensuring loan access
to a larger number of clients.

The cost of funds increased sharply since 1993. GB paid 5.76% and 4.87% on it=s bond
issues in 1995 and 1996 respectively. Interest on bonds accounted for 33% and 39% of total
interest expenses during 1995 and 1996 respectively.

Interest payments on borrowers= savings accounted for 34%, 43% and 49% of total cost
of funds ,for the years 1994, 1995 and 1996 respectively. GB offers 8.5% interest on
borrowers= savings, they also pay 2-4 percent pa. interest on donor deposits. Note that in
May 1999 accumulated borrower savings amounted to $162.56 million (176.9 million in
1998), of this amount $152.56 million were saved by the Grameen women29. GB earns 20%
interest on one-year income generating loans and 8% on ten year housing loans

With reference to the 1993-1997 profit and loss accounts30 under the income section, notice
that interest on fixed deposits ( mainly dormant donor deposits) makes up 18.5 % and 24.5%
of total income for the years 1996 and 1997 , implying that the economic viability of the GB

 Melanie S. Tammen, AForeign Aid : Treating the symptoms: misunderstanding the

Microenterprise@, in Reason 22 (1990), pp40-41
     Holcombe, op. cit., pp. 52-43
     Internet Grameen Bank website.
     Refer to Appendix B.

This document was prepared by Vishwas Satgar, Executive Director of the Co-operative and Policy Alternative
Center(COPAC). 2003
is donor driven although successful attempts continues to be made to reduce donor
dependency (see below).

11.2     Bad Debt Provision
The GB makes 100% provision for all income generating loans outstanding two years from
date of disbursement and 20% provision for all income generating loans outstanding one year
from disbursement date. In addition a 5% provision is made for disbursed ten year housing

11.3     Sources of Funds

1976-1982 the GB was funded solely by Bangladesh commercial banks and the Agricultural
Bank The first external source of funding was from IFAD (UN Development finance Agency
), who issued a loan to the Bangladeshi Government for fifty years at a 1% service charge.
The government loaned this money to the GB for fifteen years at a 3% interest rate. Since
then GB received loans from NORAD(Norwegian Aid Agency), SIDA(Swedish Aid
Agency), KFW and GTZ (German Aid Agency), CIDA(Canadian Aid Agency),
OECF(Japanese Aid Agency), the Ford Foundation and the Dutch Government. Note that the
GB refused to take any loans from the World Bank because of differences of approaches to
poverty alleviation31.

Since 1995 the GB has stopped negotiating for new grants or soft loans. GB has decided to
depend fully on commercial sources of funding. However grants and soft loans continued to
flow in, through agreements negotiated before 1996. These ended in 1998.

During 1994-1995 GB issued bonds and raised $160.75 million from Bangladeshi
commercial banks. This aided the GB to pay off central bank and to create a loanable fund on
a long term basis.

Since 1993 the flow of low cost funds form donors declined. It fell to 39% of total available
funds by end of 1993. It declined further to 34% in 1997. This demonstrates GB=s
determination to rellie more on internal sources of funds and borrowing at market rates. The
internal resource mobilisation to finance GB=s fund requirements has been a significant
contribution towards the drive to attain financial self sufficiency.

11.4     Brief History on early Sources of Funds

     Internet Grameen Bank website.

This document was prepared by Vishwas Satgar, Executive Director of the Co-operative and Policy Alternative
Center(COPAC). 2003
The GB started off as an experiment of the Janata Bank of Jobra where they issued a loan of
10 000 taka(worth $300 in 1976) staffed entirely by his students (5 students) developed a
client base of under 500 between 1976 and 1978.

In 1978 Agricultural bank issued a loan of 1000 000 taka($30 000.)

In late 1981 , commercial banks were reluctant to back expansion plans ,so The GB
management approached the Ford Foundation for a soft loan of $800 000 which was granted
and served as a guarantee fund that underwrote the loan that commercial banks issued. GB
deposited the money into an interest bearing London bank account.

In the same period in order to reduce the cost of funds they negotiated a loan of $3.4 million
from International Fund for Agricultural Development, this was matched by a loan of the
same amount from the Bangladesh Central Bank for the Grameen expansion programme in
five districts over 3 years. By the end of 1981 their cumulative loan disbursal was $13.4
million In 1982 their new disbursements increased by an additional $10.5 million By
November 1982 . During this time the Grameen membership stood at 28000 of which only
11000 were women.

11.5     Assessing Start-Up Costs

Since a proper assessment of startup costs involve many important considerations outlined
below :

The following analysis is meant to stimulate discussions around assessing startup for pilot
projects. No branch should recruit more than 100-500 borrowers in the 1st year according to
the research32. Also assume it takes 2 employees to manage 100 borrowers and 5 employees
to manage 500 borrowers. Assume further that each borrower can borrow an amount of
R1000 and pay back R25 per week for 50 weeks , hence the interest will equal 25% pa33.

Total salary cost               R 25 000 per month                             R300000
operational costs               R 5000 per month                               R 60000
capital                         R 50000 for the 1st year                       R 50000
contingency 10%                                                                R 36000
Grand Total                                                                    R446000 for the 1st year

Revenue is not considered since it is negligible for the 1st year.

Please note that the above figures are guesstimates of the possible startup costs for the 1st
year , which should be viewed with extreme caution.

  Mohammad Yunus.,op. cit.,pp. 151, however the official the Bogra Zone mentioned above
claims 500 members can be reached in the 1st year, which the analysis will accept as being
   Note that these are fair assumptions since they are based on estimates gleamed from the
This document was prepared by Vishwas Satgar, Executive Director of the Co-operative and Policy Alternative
Center(COPAC). 2003
Cost Considerations that must be included

In order to work out the actual costs, detailed analysis needs to be undertaken into the target
market, Furthermore possible loan sizes, all the fixed and variable costs and projection of
these costs over a 6 to 8 year incubation period while accommodating for inflation .
Moreover one needs to work out different scenarios eg . rate of borrower recruitment and
their demand for loans, 90%-100% repayment rate, changes in interest rates etc.

11.6     The Replication Program and Assistance Program

Seed Money for pilot Projects

The Grameen Trust offers funding to people and institutions committed to replication of the
Grameen Bank approach, but are unable to secure funding, in their own country To meet this
need , the Grameen Trust has made low interest loans available to institutions for starting
pilot projects.

Generally, 60% of the funds are earmarked for on-lending and are repayable to the Trust with
2% interest. The remaining 40% is earmarked for meeting operational expenses and is
repayable to the Trust without interest. The size of these loans range from $25,000 to

Scaling-up Funds

 Replication programmes that successfully complete the pilot phases are granted soft loans.
Successful completion of pilot phases means reaching more than a thousand very poor
women with credit and maintaining a near perfect payment rate. These projects are granted
loans for scaling up to viability. The average loan is about $400,000, and is a combination of
a low interest loan for on-lending and an interest free loan for operational expenses.

Recommendations for Successful Replication

The following recommendations emerged from the experiences of replication programmes
carried out in 59 developing and developed countries including South Africa, and are
identified as the requisites to successful replication:

   Exclusive focus on the poor
   Priority for poor rural women
   Suitable loan conditions and procedures , and open , non partisan conduct of all business.
   Individual, self-chosen , income-generating loan activities.
   collective borrower responsibility and mutual support through compulsory group savings.
   Small initial loan, repayment and eligibility for larger subsequent loans.
   Strict credit discipline and close supervision.
   Compassion, but no charity.
   promotion of individual voluntary savings.
   A social development agenda.
   Rigorous, practical management training for staff.

This document was prepared by Vishwas Satgar, Executive Director of the Co-operative and Policy Alternative
Center(COPAC). 2003
   Protection of loan funds from inflation.

The above replication facility should be seriously investigated by institutions committed to
the poverty alleviation through micro credit.

12. Main Weaknesses and Strengths

Main Weaknesses

Peer pressure - Anthropological research claims that peer pressure causes undue stress on
members and their families in regard to meeting regular weekly savings and loan
contributions , to the extent that domestic quarrels , violence and threat of violence against
women members have increased. On the contrary the experience of Professor Mohammad
suggests the opposite, he asserts that women have gained increased status in their families.
This seems more likely since women continue to join the GB in large numbers.

Lack of debt amortization policies - The poor are prone to income uncertainties, however the
GB banking mechanism demands regular weekly payments, the overwhelming pressure
forces many members who fall back on payments to borrow from unscrupulous money
lenders at exorbitant interest rates (10% per week). Moreover many members utilise their
seasonal loans to pay their income generating loans.

Dependency on subsidy - From a perspective of neoclassical economics subsidies of any
kind are considered inefficient since they do not reflect the true cost of capital and they
encourage officials implementing programmes to disregard optimising practices. However
setting up of a people oriented poverty alleviation and banking institution, of the Grameen=s
scope and magnitude requires massive donor involvement , hence GB=s attempts at total
financial self sufficiency it is most admirable.

Personality Centred - Some critics argued that the success of the GB was largely due to the
personality and management style of its managing director Professor Muhammad Yunus.
However this criticism may be warranted in describing the experimental stages of
Grameen=s development, but unwarranted in regard to the Banks present position since
senior management number over 3000 individuals.

Consumption Spending - Despite constant monitoring of income generating loan usages,
many borrowers still use a significant part of their loans for consumption and other purposes.

Main Strengths

Banking for the Poor - The Grameen Bank has successfully created a new paradigm of
banking services. This model of banking is revolutionary because it takes banking services to
the poorest villagers , rather than ask them to come to the bank. It has successfully adapted
the credit delivery system to suite the needs of the poor rather than follow the system of
conventional banks which are designed for male, literate elites. Moreover its= success story
has proved that even the poorest landless peasants, with a little assistance, have the capacity
to take charge of their own lives and escape the poverty trap through discipline ,
industriousness and accountability.

This document was prepared by Vishwas Satgar, Executive Director of the Co-operative and Policy Alternative
Center(COPAC). 2003

Empowerment - Poverty alleviation is not merely raising the income of the poor, it also
means the political and psychological changes that empower poor people to take charge of
their destinies. By offering credit to the poor (thus increasing their self esteem) and by
creating the necessary support and social awareness mechanisms, the GB has succeeded in
empowering the most marginalised sectors of society.

Easy Replication - The GB has successfully developed sustainable grassroots solutions to the
problems of poverty alleviation and basic infrastructure provision the are economically viable
that may be replicated across different cultures.

Going Beyond Donor Assistance - GB=s continued attempts to attain self sufficiency by
reduced reliance on donor funds and through increasingly mobilising internal sources of
funds is most remarkable since many believe that it is impossible to tackle poverty alleviation
without donor assistance.

A Common Praxis - There is a remarkable consistency between the vision articulated by
senior management and that espoused by branch managers and field staff. Together they
express the commitment to reducing poverty and also translate it into action on a daily basis.
Moreover corruption amongst employees is almost non-existent, unlike their counterparts in
the commercial banking institutions of Bangladesh.

This document was prepared by Vishwas Satgar, Executive Director of the Co-operative and Policy Alternative
Center(COPAC). 2003
                                                    Section - IV
13. General Recommendations

The policy recommendations that follow draw on the innovative institutional arrangements,
practices and policies designed within the Co-operative Banking Model and the Grameen
Bank Model.

There are five main recommendations :

(1) Specific Institutional Recommendations

1.1 The Midrand Council consider establishing a Savings and Credit Co-operative (SACCO)
    in the Greater Midrand area with the following objectives and institutional tiers :


   Harness local community savings in order to provide the poor with access to credit;
    Establish a financial backbone to sustain and develop the local co-operative movement;
   Ensure local economic development is financed to meet the needs of the poor in an
    ecologically sustainable manner.

The Board of Directors
 Sets overall policy for the co-operative;
 Employs managerial staff;
 Establishes an Education Committee and a Credit Committee;
 Has formalised representation from the Council and at least two co-operatives operating
   in the community;
 Ensures regular auditing.

Supervisory Committee
 Monitors the operation of the Board;
 Ensures regular audits are carried out.

Management Centre
 Provides technical back-up and training to branches;
 Has regular meetings with branches to receive reports on operations;
 Provides business planning facilities to co-operatives and other clients of the SACCO;
 Plans and develops projections for the expansion of the SACCO;
 Makes policy recommendations and provides reports to the Board of Directors;
 Sits on the SACCO Credit Committee;
 Sources outside expertise when necessary;
 Employs staff for the branches;
 Manages the IT of the SACCO and ensures proper linkages with even commercial banks
  to acquire benefits of ATM technology of possible.
 Produces publication;
 Liases with SACCOL.


This document was prepared by Vishwas Satgar, Executive Director of the Co-operative and Policy Alternative
Center(COPAC). 2003
   Receives deposits;
   Processes loan applications above R2000 –00 through the SACCO Credit Committee;
   Organises Savings and Credit Teams from membership base;
   Monitors compulsory saving and repayment of Saving and Credit Teams;
   Actively recruits and targets potential members;
   Runs education meetings in various areas;
   Provides the Management Centre with regular reports.

(2)The Savings and Loan Delivery System

The savings and loan delivery system envisaged should be member driven and based on the
twin objective of building up a stable savings portfolio that contributes to self sufficiency and
a loan system that balances meeting the needs of members and ensuring the financial self
sufficiency of the co-operative, as well.

It is proposed that the following conceptual framework be considered for the design of a
savings and loan delivery system :

2.1 Membership
 The common bond for membership is the fact of living in the common area of the Greater
 Every member pays a once of joining fee (that is not refundable) and buys a share for a
    certain sum of money. A member should be able to buy more than one share but not more
    than ten, for which they would receive a dividend once the co-operative begins to produce
    a surplus. All members, irrespective of the number of shares they own would be entitled to
    only one vote;
 Membership shall be opened to co-operatives, community organisations and even local
    government itself;
 Members will be entitled to vote for the Board of Directors and can have a say on policy
 Every member is entitled to a monthly financial statement
 Members can only utilise the services of the co-operative once they are organised into a
    Savings and Credit Team of 7 people, living in their immediate area. The Savings and
    Credit team would monitor compulsory savings by meeting twice a month and would also
    monitor loan repayment;
 Every member should receive a “smart card” that would enable withdrawals and balance
    statements to be obtained at any ATM, as well as branches of the SACCO.

2.2 Savings and Investment Policy

   Savings can happen through payroll deductions, stop order and direct cash deposits;
   Savings must be compulsory for all members and monthly minima must be agreed to for
    employed and unemployed members. The Savings and Credit Teams must monitor
    compulsory savings of members, using the monthly financial statements they would

This document was prepared by Vishwas Satgar, Executive Director of the Co-operative and Policy Alternative
Center(COPAC). 2003
   At least 80% of savings received, equity finance and other reserves of the SACCO must
    be invested;
   10% must be saved with the CFC of SACCOL;
   Savings products – both fixed, annual like X-mas savings and open account – must
    receive commercial rates of return that are not below inflation;
     The savings and depositor base of the SACCO must be constantly expanded to even
    include a host of organisations including the local council, other co-operatives, trade
    unions and community organisations.

2.3 Loans Policy

   Loans must only happen through Savings and Credit Teams and only three out of the
    seven members in the team will get loans first. Based on successful repayment, loans will
    be extended to other members and even obtained for other purposes;

   Loan products have to be decided and should initially have a mix of productive,
    consumption and development products. A special loan product for co-operatives must be
    developed, either for start-up or expansion, and this has to be linked to proper business

   Loans should only be given out once the SACCO has achieved financial self sufficiency
    through its savings policy. The percentage of assets given out as loans initially has to be
    prudent and well managed;

   An interest rate for loans must be set which must also contribute to profitability, provision
    for loan loss and administrative /operating costs;

   A repayment period must be decided on for loan products;

   Collateral for loans should be based initially on savings (i.e. a 1:1 ratio), guarantees by
    other members and any other relevant collateral, like pension and provident funds, should
    also be considered. As repayment is proved the loan ratio of a member can be improved
    to 1:3 i.e. three times more than actual savings.

   Non-repayment of loans or defaulting must initially be handled through the Savings and
    Cedit Team that the member belongs to, therafter notices and final warnings must be
    issued by the branch before claiming the collateral;

   The credit approval process, particularly for amounts over two thousand rands, must be
    facilitated by the branch manager who prepares the relevant documentation for the
    Credit Committee. A member who obtains a loan and fails to make repayment must also
    have recourse to the Credit Committee to renegotiate terms of repayment. Interest should
    not be charged on late payment;

   Branch managers can approve loans, particularly emergency loans that are less than two
    thousand rand.

(3)Technology – The Smart Card

This document was prepared by Vishwas Satgar, Executive Director of the Co-operative and Policy Alternative
Center(COPAC). 2003

The feasibility of providing members with a “ plastic smart card” must be explored with
SACCOL. The extent to which it can be harmonised with the current ATM banking
infrastructure has to also be explored. If the CUBIS system, used by SACCOL, allows for this
then this technology can be used for the following purposes :
 Easy withdrawals, even through the ATM system, in Midrand and any other place;
 Controlling of withdrawals by placing a withdrawal limit if there is a loan taken out by
    the particular member.
 This technology also opens up the prospect of experimenting with a complimentary

(4) The Public - Community Partnership

The idea of Savings and Credit Co-operative for Midrand can only work if there is
widespread support. To achieve this the Council must secure a public and community
partnership for the Midrand SACCO. The main focus of the partnership is to bring the poor
and women into this initiative that are unemployed or are poor working class and self
employed. The public and community partnership should be launched at a workshop which
achieves the following:

   A declaration that clearly defines the objectives of the SACCO, the benefits to members
    and responsibilities of the parties associated with this initiative;
   Constitutes a community liason task group that would participate in the capacitation
   Launches a recruitment program for members; and
   Clarifies and kicks of the capacitation process.

(5) The Capacitating Agents and the Capacitation Process

Consideration must be given to establishing a capacitation team that includes COPAC,
SACCOL and FSA. The capacitation process that this team will manage will include the
following :

    Finalisng and clarifying the Concept envisaged for the SACCO;
    Workshopping the liason team to secure statutes, bye laws, business plan and policies;
    Training of prospective staff;
    Forming and registering the co-operative once recruitment is at a critical level;
    Setting up a pilot branch of the SACCO.

This document was prepared by Vishwas Satgar, Executive Director of the Co-operative and Policy Alternative
Center(COPAC). 2003

Appendix A - The Grameen Banks Sixteen Decisions

The following 16 point decisions evolved over a period of time and were formulated at
national workshops. These points should be viewed as programmes of action that borrowers
both proudly recite and attempt to follow in their daily lives.

1. We shall follow and advance the four principles of the Grameen Bank - discipline , unity ,
courage and hard work - in all walks of our lives.

2. Prosperity we shall bring to our families.

3. We shall not live in a dilapidated house. We shall repair our house and work towards
constructing new houses at the earliest opportunity.

4. We shall grow vegetables all year round. We shall eat plenty of them and sell the surplus.

5. During the plantation seasons , we shall plant as many seedlings as possible.

6. We shall plan to keep our families small. We shall minimize our expenditures. We shall
look after our health.

7. We shall educate our children and ensure that we can earn to pay for their education.

8. We shall always keep our children and the environment clean.

9. We shall build and use pit-latrines.

10. We shall drink water from tubewells. If it is not available , we shall boil water or use alum
to purify it.

11.We shall not take any dowry in our son=s weddings, neither shall we give any dowry in
our       daughter=s wedding. We shall keep the centre free from the curse of the dowry. We
shall not     practice child marriage.

12. We shall not commit any injustice, and we will oppose anyone who tries to do so.

13. We shall collectively undertake larger investments for higher incomes.

14. We shall always be ready to help each other. If anyone is in difficulty , we shall all help
him or her.

15. If we come to know of any breach of discipline in any centre , we shall all go there and
help restore discipline.

16. We shall introduce physical exercises in all our centres. We shall take part in all social
activities collectively

This document was prepared by Vishwas Satgar, Executive Director of the Co-operative and Policy Alternative
Center(COPAC). 2003

This document was prepared by Vishwas Satgar, Executive Director of the Co-operative and Policy Alternative
Center(COPAC). 2003
Appendix B – Profit and Loss Account as at 31st December

                    Mn. US$              Mn. US$              Mn. US$              Mn US$               Mn US$
                    1993                 1994                 1995                 1996                 1997
Average             39.14                40.00                40.20                40.86                45.45
Dollar Rate
of the Year
Total               33.86                50.46                56.81                56.63                45.66
Loan                26.97                41.16                49.15                42.96                30.96
Interest on         4.23                 6.55                 4.88                 10.47                11.32
Other Income        2.66                 2.75                 2.78                 3.20                 3.38
Total               33.61                49.92                56.44                56.17                45.34
Interest            9.90                 19.80                21.02                19.80                19.26
Administrati        23.71                30.12                35.42                36.37                26.08
ve and other
Profit              0.25                 0.54                 0.37                 0.46                 0.32

This document was prepared by Vishwas Satgar, Executive Director of the Co-operative and Policy Alternative
Center(COPAC). 2003

This document was prepared by Vishwas Satgar, Executive Director of the Co-operative and Policy Alternative
Center(COPAC). 2003


Published Books and Articles

Amin, N and Bernstein, H (1995) The Role of agricultural co-operatives in Agricultural and
rural development; Policy Paper 32; Land and Agriculture Policy Centre

Basu S. (1997) “Why Institutional Credit Agencies are Reluctant to Lend to the Rural Poor: A
Theoretical Analysis of the Indian Rural Credit market” World Development Vol. 25 No. 2

Holcombe S. (1995) Managing To Empower – The Grameen Bank’s Experience of Poverty
Alleviation, Zed Books : London

Hollis A. and Sweetman A. (1998) “Microcredit : What Can we Learn from the Past?” World
Development Vol. 26 No.10
Hussi, P, Murphy, J, Lindberg, O and Brenneman, L (1993) The development of co-
operatives and other rural organisations; World Bank Technical Department Series; No 99;

Jain P.S. (1996) “Managing Credit for the Rural Poor: Lessons from the Grameen Bank”
World Development Vol. 24 No. 1

Kimuyu K.P. (1999) “ Rotating Saving and Credit Associations in Rural East Africa” World
Development Vol. 27 No.7

Mosley P. and Hulme D. (1998) “ Microenterprise Finance: Is there a Conflict Between
Growth and Poverty Alleviation?” World Development Vol.26 No.5

Muhammed Y. (1998) Banker to the Poor – The Autobiography of Mohammad Yunus,
founder of the Grameen Bank, Aurum Press: London

Philip T. K Producer co-ops in South Africa: their economic and political limits and potential;
Labour Studies Research Report 4; Sociology of Work Programme; University of the

Philip, T. K (1990) “The Phalaborwa printing co-op: born out of war” in SALB; vol 14 No 7

Rahman A. (1999) “Microcredit Initiatives for Equitable and Sustainable Development: Who
Pays? “ World Development Vol. 27 No.1

Other Documents

RSA-USA Bi-national Commission, Assessment of the Village Bank Model, 1997.

Schoeman J.H. , Village Bank Project – Product Analysis, 1996.

Cape Metropole SACCO, Products Sheet, 1999.
This document was prepared by Vishwas Satgar, Executive Director of the Co-operative and Policy Alternative
Center(COPAC). 2003

Model Statute, Savings and Credit Co-operative

Statute, National Financial Service Association.

Government Gazette , No 16167, 1994

Government Gazette , No 18713, 1998


David De Jong, General Manager SACCOL, Interview : November (1999).

Harriet Stewart, Manager Cape Metropole SACCO, Interview: November, (1999).

Wezi Ximiya, Executive Officer FSA, Interview : December (1999).

Charles Moiloa, Administrator Lehurutse Financial Services Co-operative, Interview:
December, (1999).

Shadrack Kgosimang, Administrator Motswedi Village Bank, Interview: December, (1999).

Grameen Website -

SACCOL Website –

World Council of Credit Unions –

This document was prepared by Vishwas Satgar, Executive Director of the Co-operative and Policy Alternative Center(COPAC).


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